SEC Proposes Framework for Crypto Custody

The Securities and Exchange Commission (SEC) has proposed a new framework for how registered investment advisers and regulated funds can custody crypto assets. The framework would allow these entities to use self-custody for crypto assets under specified conditions, subject to safeguards and investor protection measures. Chairman Paul Atkins has advocated for state-chartered trust companies as additional custodians for regulated entities.

The proposal would update requirements involving financial statement audits and broker-dealer custody services for regulated funds. It would also allow state trust companies to custody crypto assets for investment advisers and regulated funds. The SEC aims to address custody arrangements that do not fit cleanly within rules developed before crypto assets existed.

The proposed framework is part of a broader SEC effort to update securities rules for crypto assets. The agency has been working on rules covering tokenized securities and transfer agents, and has issued guidance on on-chain fundraising and tokenized securities. The proposed custody rules are not yet effective and will be open for public comment for 60 days.